Howard's End: Writing On The Wall For Super Fund
While politicians in New Zealand want to create a superannuation fund which will invest some of the money in the off-shore money markets, the South Australian government fund faces long-term losses of half a billion dollars. Maree Howard writes.
Plunging world stockmarkets have caused a loss this year of $30 million in the South Australian government's superannuation fund.
Funds SA, as it is called, delivered a result of minus 4 per cent instead of the 7.5 per cent forecast.
The government has since introduced a "very, very tough budget" following its scramble to find an extra $30 million this year and a similar amount in on-going years to cover losses.
The South Australian government knew that it was going to be a bad year for superannuation funds but the extent of the losses, revealed in the last few weeks, came as an unexpected shock.
The losses compounded what was already to be a budget of severe cutbacks as the Government attempted to honour its pre-election pledges of a balanced budget and no new taxes or tax increases.
It was expected that the superannuation scheme would be fully funded by 2034 but this assumed it would achieve average growth of 7.5 per cent and this target had been factored into forward estimates in past budgets.
However, the financial year's minus 4 per cent results means a shortfall of 11.5 per cent. This will increase the government's superannuation liabilities over the next three decades by $AUS 410 million.
Other Australian States have been hit with similar financial blows, such as Queensland where its superannuation investment target fell from 7.5 per cent to zero.
Meanwhile, after carrying surpluses, 40 States in the U.S. now have deficits of between $US40 and 50 billion dollars with emergency meetings now being called between State Governor's and the U.S. Federal government.
The writing is on the wall. Any future New Zealand government should exercise great caution before it establishes an investment superannuation fund - the outcome could be catastrophic for our future.